20.05.09  Financial Times (House and Home) 16.05.09

An address with a view

Marie-Hélène Lundgreen recently sold a top-floor apartment in a mansion in Paris’s “golden triangle” to a French financier returning from London with several years of City bonuses carefully saved. With 300 sq metres, the space was recently renovated and its location – overlooking a tree-lined square between the Place d’Etoile and Place d’Iéna, within walking distance of many of the capital’s landmarks – is ideal. The cost? €6m.

Only a few weeks earlier the director of Belles Demeures de France, a partner of Christie’s and the Daniel Féau network, sold another property to a young French family who had been looking for 220 sq metres but found they could afford more: an airy 3rd floor, 290 sq metre flat in the 16th arrondissement on Rue Meunier, overlooking the gardens of the St James Club.

The two deals reflect several trends that have emerged in the Paris property market over recent months: price falls of 10-15 per cent for some luxury residences, the return of French buyers, including financial wizards from London, and the speed with which the right homes are finding ready buyers. Few real estate agents claim that business is dynamic but a surprising number label it “active”.

“I have two clients trying to buy the same apartment [near the Place des Vosges, in the 3rd arrondissement] at the asking price,” says Françoise Koops, director of the Agence Rive Droite at Emile Garçin Real Estate. “That’s a sign that the market is healthy.”

As with many of the world’s other big cities, Paris witnessed a luxury property market boom in the decade to 2008, with prices nearly tripling. But, again as with everywhere else, the market began to slow in the second half of last year. According to the Chambre de Notaires de Paris, a group of lawyers handling property deals, the average cost of a Paris apartment fell 1.9 per cent to €6,520 per sq metre, or about €650,000 for a three-bedroom family apartment, from the third quarter of 2008 to the fourth, while transaction volumes were down by 23 per cent for existing homes and 25 per cent for new ones.

Yet the capital’s market faired better than most, with prices still up by 2.5 per cent year on year, compared with declines of up to 4 per cent and a 44 per cent drop in sales volumes in the suburbs. And, as of April, the chamber was forecasting a total 2009 price fall of just 5 per cent in Paris.

Indeed, the most desirable neighbourhoods even continued to show strong price increases last year. In the 6th arrondissement, centred on Luxembourg Gardens, for example, average prices were up 4.2 per cent from 2007 to 2008 and an apartment that would have cost less than €4,000 per sq metre a decade ago is now worth more than €10,000 per sq metre. In the 5th arrondissement, opposite the Ile St-Louis on the south bank of the River Seine, average prices were up an even more astonishing 6.7 per cent year on year to €8,580 per sq metre, while the 9th, north of the Boulevard Haussmann, showed a 6.4 per cent annual increase to €6,840 per sq metre.

But has the trend continued into the spring? Yes, says Nathalie Khayat, head of the CBRE agency on Rue du Bac, because buyers in central Paris will still pay up for “an address and a view”.

That means a handsome apartment in the 7th arrondissement, overlooking the Parc du Champs de Mars and the Eiffel Tower, or in the 6th with views across the Luxembourg Gardens to city landmarks, will continue to command prices of €30,000 per sq metre or more, while the costs of those in the “golden triangle”, bordered roughly by the Avenue d’Iéna, Avenue Montaigne and the Champs Elysées, in the 8th and 16th, are little changed since January 2008.

“The difference between the Paris market and that of London or New York is that this is a scarcity market,” Lundgreen explains. “It is almost impossible to build anything.”

Marc Foujols, executive chairman of agents Groupe Marc Foujols, reports that values of second-line properties, even in good locations, are now down about 10-20 per cent. “A property that would have sold for €15,000 per sq metre a year ago will be priced at €13,000 per sq metre today,” he says. Yet he also agrees with Lundgreen’s analysis, arguing that “exceptional properties still attract exceptional prices”.

Because French investors have traditionally preferred property to the stock market and few have mortgages, except for reasons of tax efficiency, there are hardly any distressed sellers. Those who wish to sell, such as families dividing an inheritance or those wanting a larger property, are meanwhile being realistic about prices in an effort to whet the appetites of more discerning househunters.

At the top end, international buyers continue to set prices, with families from the Middle East, Latin America, Italy and Greece still prominent, even if Britons, Americans and Russians are less present. But there is also increasing interest from natives too. “Our buyers include expatriate French returning but also French families,” Koops says. “Interest rates have fallen and banks are willing to lend.”

Similar themes are evident on the Côte d’Azur, where the combination of a mild climate, a beautiful coast backed by hills and a classic French lifestyle have long attracted the same wealthy jet-set. “A client might have his main home in Munich, a villa in St Tropez and a pied-à-terre in Paris,” says Foujols.

Certainly, St Tropez shows no signs of recession. As the temperature climbed toward 25°C one recent Saturday morning, crews were washing and polishing the massive 30- and 40-metre motor yachts lined up at the quayside, while shoppers strolled along the Place des Lices, buying cherries at €12.50 a kilo and dallying in front of the Louis Vuitton, Armani and Tod’s stores.

The town is a coveted second-home destination not only for this sort of glitz but also for its contrastingly simple architecture, harking back to its fishing-village origins; rigid planning laws that have protected the surrounding parasol pine forests; and its discreet villas owned by billionaires such as L’Oréal heiress Liliane Bettencourt and self-made businessmen Bernard Arnault, François Pinault and Vincent Bolloré. And, as in Paris, it’s the address and the view that determines prices.

Because the Côte d’Azur’s high season begins only at Easter, the full effects of the recession on the regional market are not yet clear. Yet Jonathan Gray of Beauchamp Estates’ south of France office says prices on rare, private waterfront properties increased three- to five-fold since 2003 and still show little sign of falling.

Antoine Garçin, who heads the Riviera team at Emile Garçin, echoes Foujols’ comments about Paris: “For exceptional properties, prices do not fall.” Take the 270 sq metre house on 3,500 sq metres of grounds including a beach and jetty, within the commune of St Tropez that Foujols is selling for €10m, for example.

But, for lesser properties, he thinks the Côte d’Azur is starting to see a welcome correction from a five-year period of “unhealthy” annual 15 per cent price rises. Today, “it is a buyers’ market,” he says. “Now they take their time: they look at where it is, what it is, the grounds and so on. They prefer the classic locations: St Tropez, Antibes, Cannes.”

Gray sees the same attitudes and says that sellers are slowly adapting to the new environment. “Transactions virtually froze in the autumn, [with everyone] holding their breath,” he says. Before, “a seller might have asked €30m but been happy to walk away with €20m. But now, if you want €20m, you might ask for €22m or €23m.”

Moving in are the French buyers seen in Paris, who avoided the stock market and so can now shift from banks and bonds into property as interest rates fall. “The French have come back, seeking investment opportunities,” Gray says. “They are looking for bargains.”

Ross Tieman is an FT correspondent based in Aveyron, France